3 Ways to insure the structure of your home: Understand the difference
Replacement Cost: Insurance that pays the policyholder the cost of replacing damaged property without deduction for depreciation, but limited to a maximum dollar amount.
Extended Replacement Cost: An extended replacement cost policy, one that covers costs up to a certain percentage over the limit (usually 20% to 50% – a good reason to compare policies). This gives you protection against such things as a sudden increase in construction costs.
Actual Cash Value: This covers the cost to replace your home minus depreciation costs for age and use. For example, if the life expectancy of your roof is 20 years and your roof is 15 years old, the cost to replace it in today’s marketplace is going to be much higher than its actual cash value.